New tax rates and school funding plan

NEIGHBORS:

A new school funding bill is on the Governor’s desk and a tax bill is law. See details below.

SCHOOL FUNDING BILL TO THE GOVERNOR

SB 19 creates a new school funding formula. It passed the House 67-55 and the Senate 23-17.  It is on the Governor’s desk for his consideration. He can sign it, veto it, or let it become law without his signature. He has made no formal statement about his intentions that I’m aware of.

The formula looks very similar to our old funding formula in terms of base state aid plus factors for those things that cause extra cost. It adds $195 million to school funding for the coming year and another $98 million in 2019. After that, increases would be based on a consumer price index adjustment and add about $55 million a year.

There was still wide disagreement on the bill as some say it will not meet the constitutional muster required by the court. Those supporting the bill say they believe it does meet the court’s order, especially in the area of students not reaching proficiency, and we should send it and let the Justices decide. The court set a date of June 30 to get a formula in place and approved. Once it gets out of the capitol and to the court, there still has to be time allowed for the parties involved to weigh in. Not a done deal yet.

Here are some of the key elements of the bill:

  • Base state aid goes to $4006 per pupil in 2017-18; $4128 in 2018-19; and up to $4317 by the 2020-21 school year. Opponents noted the aid after five years would still be less than in 2009.
  • The student count will be based on the prior year or second prior year’s enrollment, whichever is higher. Now they do a count in September of the current year. The idea being that going forward districts will know the count funding is based on before budgets have to be set.
  • Funding for at-risk students will be determined based on number of students in poverty, as in the past, but with increased funding per pupil. All at-risk aid must be spent on at-risk students as defined by the State Board of Education.
  • Every school district will have a floor of 10% at-risk students, whether they actually have that many students in poverty or not. I’m guessing this was put in the bill to send extra money to richer districts in Johnson County who have complained for years they don’t get enough money per student.
  • The bill expands funding for scholarships for private schools starting July 2018. Currently, only corporations may donate to private schools for tax credits. This bill allows private individuals to also get those tax credits. It also changes eligibility to students on free lunch at the 100 lowest performing schools, which is an increase from the 91 eligible schools previously. It also adds an accreditation requirement by July 2020.
  • The state will pay for all-day kindergarten and add $2 million to help more 4-year-old at-risk students attend pre-k.
  • They added $12 million to special education funding.
  • They added $800,000 for teacher mentoring and $1.7 million for professional development.
  • Slight increase in transportation funding so that no district will receive less than in the past.
  • The statewide 20-mill levy for schools will remain in place.
  • The local option budget remains the same. School districts can levy up to 30% on school board action alone. They can go up to 33% with board approval and right of protest petition.
  • Utilities, property and casualty insurance will be added as options for capital outlay funding in the school district republishes their capital outlay resolution.
  • Currently, Kansas pays for some out-of-state students in towns along our border. Funding for those students gets reduced to .5 by 2021-22.
  • Puts a cap on the amount of bonds approved by the State Board of Education based on the bond amount paid off the preceding year.

NEW TAX PLAN IS LAW

The Brownback tax plan of 2012 came to an end last night when the House and Senate both voted to override the Governor’s veto of SB 30. The bill increases taxes by $591 million in the 2018 fiscal year and $633 million in the 2019 fiscal year. This would cover the budget passed by the Senate earlier as well as the school funding increases. There could still be problems a couple of years out.

Here are the key points of the tax bill:

  • New tax brackets: marrieds-filing-jointly with $30,000 and less (now 2.7%) to 2.9% for this tax year and 3.10% for tax year 2018; $30,000 to $60,000 (now 4.6%) to 4.9% for the current tax year and 5.25% for tax year 2018, and more than $60,000 (now 4.6%) to 5.2% for this tax year and 5.7% for tax year 2018 and after. This restores the third tax bracket for higher incomes. Note that these final tax brackets are lower than where they were in 2012.
  • It eliminates the tax-free status of non-wage income from LLCs, chapter S subcorps, and sole proprietor businesses.
  • These businesses can also begin claiming certain non-wage business income losses aligning with federal tax law.
  • Medical expenses can again be itemized at 50.0 percent of expenses currently allowed under federal law for tax year 2018. The amount would be increased to 75.0 percent of the federal amount for tax year 2019 and to 100.0 percent in tax year 2020 and thereafter.
  • Itemized deductions for mortgage interest and property taxes, currently set at 50.0 percent of the federal amounts, increases to 75.0 percent for tax year 2019 and to 100.0 percent beginning in tax year 2020.
  • A child and dependent care tax credit repealed in 2012 is restored in stages. The credit is set at 12.50 percent of the federal amount
    for tax year 2018, 18.75 percent for tax year 2019, and 25.00
    percent for tax year 2020 and thereafter.
  • The low-income exclusion threshold is reduced from $12,500 to $5,000 for married filers and from $5,000 to $2,500 for single
    filers.